AUSTRIA – Pension funds in Austria should deliver a return of between 3% and 6% for 2006 - far below the 11.4% return for 2005, according to Christian Böhm, head of the Austrian pension fund association (FVPK).
In an interview with the Wiener Zeitung, Böhm said that while the schemes’ return in the first quarter was between 2% and 3%, the result for the full year would not be much above that.
“What we finally end up with will in large part depend on the way interest rates go in the US and Europe,” he said.
Austrian pension funds, Pensionskassen, are heavy fixed income investors, allocating around two-thirds of their money to the asset class.
Meanwhile, the severe equity market correction last quarter was likely to have weighed heavily on the schemes’ returns. Equity markets have recovered somewhat this quarter.
Böhm said in the interview that the equity allocation of FVPK’s members would vary between 20% and 40% this year.
FVPK represents 21 Austrian Pensionskassen, which in turn cover 20% of Austria’s workforce and have €11bn in assets. This compares with around 60% in Germany, and as much as 100% in the Netherlands and Switzerland.
However, Böhm said that by 2016, the number of Austrian workers insured by FVPK’s members would double to 40%.
He attributed the increase to the fact that corporate pensions were now anchored in wage agreements for Austria’s paper and financial services, and could soon spread to those for its electric and chemical industries.
Austrian civil servants may also figure among the clients of Pensionskassen, Böhm added.
To further boost demand for corporate pensions, the FVPK has previously urged the government to permit tax write-offs for contributions to standing corporate schemes.
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